board of directors - lsc 2011 annual report... · neighborhood legal services association...

Board of DirectorsJohn G. Levi, Chairman

Martha Minow, Vice Chair

Sharon L. Browne

Robert J. Grey Jr.

Charles N.W. Keckler

Harry J.F. Korrell III

Victor B. Maddox

Laurie Mikva

The Rev. Pius Pietrzyk, O.P.

Julie A. Reiskin

Gloria Valencia-Weber

OfficersJames J. Sandman, President

Victor M. Fortuno, Vice President of Legal Affairs, General Counsel and Corporate Secretary

David L. Richardson, Treasurer and Comptroller

Office of Inspector GeneralJeffrey E. Schanz, Inspector General

Joel S. Gallay, Special Counsel

Ronald “Dutch” Merryman, Assistant Inspector General for Audit

Thomas D. Coogan, Assistant Inspector General for Investigations

Laurie Tarantowicz, Assistant Inspector General and Legal Counsel

David C. Maddox, Assistant Inspector General for Management and Evaluation

MINNESOTAAnishinabe Legal ServicesCentral Minnesota Legal ServicesLegal Aid Service of Northeastern MinnesotaLegal Services of Northwest Minnesota CorporationSouthern Minnesota Regional Legal ServicesMISSISSIPPIChoctaw Legal DefenseMississippi Center for Legal ServicesNorth Mississippi Rural Legal ServicesMISSOURILegal Aid of Western MissouriLegal Services of Eastern MissouriLegal Services of Southern MissouriMid-Missouri Legal Services Corporation

MAINEPine Tree Legal AssistanceMARYLANDLegal Aid BureauMASSACHUSETTSMassachusetts Justice ProjectMerrimack Valley Legal ServicesNew Center for Legal AdvocacyVolunteer Lawyers Project of the Boston Bar AssociationMICHIGANLegal Aid and Defender AssociationLegal Aid of Western MichiganLegal Services of Eastern MichiganLegal Services of Northern MichiganLegal Services of South Central MichiganMichigan Indian Legal Services

ALABAMALegal Services AlabamaALASKAAlaska Legal Services CorporationARIZONACommunity Legal ServicesDNA-Peoples Legal ServicesSouthern Arizona Legal AidARKANSASCenter for Arkansas Legal ServicesLegal Aid of ArkansasCALIFORNIABay Area Legal AidCalifornia Indian Legal ServicesCalifornia Rural Legal AssistanceCentral California Legal ServicesGreater Bakersfield Legal AssistanceInland Counties Legal ServicesLegal Aid Foundation of Los AngelesLegal Aid Society of Orange CountyLegal Aid Society of San DiegoLegal Services of Northern CaliforniaNeighborhood Legal Services of Los Angeles CountyCOLORADOColorado Legal ServicesCONNECTICUTStatewide Legal Services of ConnecticutDELAWARELegal Services Corporation of DelawareDISTRICT OF COLUMBIANeighborhood Legal Services Program of the

District of ColumbiaFLORIDABay Area Legal ServicesCoast to Coast Legal Aid of South FloridaCommunity Legal Services of Mid-Florida Florida Rural Legal ServicesLegal Services of Greater MiamiLegal Services of North FloridaThree Rivers Legal ServicesGEORGIAAtlanta Legal Aid SocietyGeorgia Legal Services ProgramHAWAIILegal Aid Society of HawaiiIDAHOIdaho Legal Aid ServicesILLINOISLand of Lincoln Legal Assistance FoundationLegal Assistance Foundation of Metropolitan ChicagoPrairie State Legal ServicesINDIANAIndiana Legal ServicesIOWAIowa Legal AidKANSASKansas Legal ServicesKENTUCKYAppalachian Research and Defense Fund of KentuckyKentucky Legal AidLegal Aid of the Blue GrassLegal Aid SocietyLOUISIANAAcadiana Legal Service CorporationLegal Services of North LouisianaSoutheast Louisiana Legal Services Corporation

In 2011, the Legal Services Corporation provided grants to 135 independent,nonprofit organizations that provide free civil legal services to low-incomeAmericans from 915 offices located in every state, the District of Columbia andthe territories of the United States of America.

LSC Across the Country Legal Aid of Western OhioLegal Aid Society of Greater CincinnatiOhio State Legal ServicesThe Legal Aid Society of ClevelandOKLAHOMALegal Aid Services of OklahomaOklahoma Indian Legal ServicesOREGONLegal Aid Services of OregonPENNSYLVANIALaurel Legal ServicesLegal Aid of Southeastern PennsylvaniaMidPenn Legal ServicesNeighborhood Legal Services AssociationNorthwestern Legal ServicesNorth Penn Legal ServicesPhiladelphia Legal Assistance CenterSouthwestern Pennsylvania Legal ServicesRHODE ISLANDRhode Island Legal ServicesSOUTH CAROLINASouth Carolina Legal ServicesSOUTH DAKOTADakota Plains Legal ServicesEast River Legal ServicesTENNESSEELegal Aid of East TennesseeLegal Aid Society of Middle Tennessee and

the CumberlandsMemphis Area Legal ServicesWest Tennessee Legal ServicesTEXASLegal Aid of NorthWest TexasLone Star Legal AidTexas RioGrande Legal AidUTAHUtah Legal ServicesVERMONTLegal Services Law Line of VermontVIRGINIABlue Ridge Legal ServicesCentral Virginia Legal Aid SocietyLegal Aid Society of Eastern VirginiaLegal Services of Northern VirginiaSouthwest Virginia Legal Aid SocietyVirginia Legal Aid SocietyWASHINGTONNorthwest Justice ProjectWEST VIRGINIALegal Aid of West VirginiaWISCONSINLegal Action of WisconsinWisconsin JudicareWYOMINGLegal Aid of Wyoming

U.S. TerritoriesGUAMGuam Legal Services CorporationMICRONESIAMicronesian Legal ServicesPUERTO RICOCommunity Law OfficePuerto Rico Legal ServicesVIRGIN ISLANDSLegal Services of the Virgin Islands

NEW MEXICONew Mexico Legal AidNEW YORKLegal Aid Society of Mid-New YorkLegal Aid Society of Northeastern New YorkLegal Assistance of Western New YorkLegal Services NYCLegal Services of the Hudson ValleyNassau/Suffolk Law Services CommitteeNeighborhood Legal ServicesNORTH CAROLINALegal Aid of North CarolinaNORTH DAKOTALegal Services of North DakotaOHIOCommunity Legal Aid Services

MONTANAMontana Legal Services AssociationNEBRASKALegal Aid of NebraskaNEVADANevada Legal ServicesNEW HAMPSHIRELegal Advice & Referral CenterNEW JERSEYCentral Jersey Legal ServicesEssex-Newark Legal Services ProjectLegal Services of Northwest JerseyNortheast New Jersey Legal Services CorporationOcean-Monmouth Legal ServicesSouth Jersey Legal Services

The Legal Services Corporation is the single largest funder of civil legal services in the country and is at the forefront of a

public-private partnership focused on fulfilling America’s pledge of equal justice for all.

Since its founding almost four decades ago, LSC has been making a difference in the lives of low-income Americans by

providing high-quality civil legal assistance to veterans, the elderly, victims of domestic abuse, tenants facing unlawful

evictions, and others.

“The Congress finds and declares that—(1) there is a need to provide equal access to the system of justice in our Nation for individuals who

seek redress of grievances;

(2) there is a need to provide high quality legal assistance to those who would be otherwise unableto afford adequate legal counsel and to continue the present vital legal services program;

(3) providing legal assistance to those who face an economic barrier to adequate legal counselwill serve best the ends of justice and assist in improving opportunities for low-income personsconsistent with the purposes of this Act.”

—Excerpt from theLegal Services Corporation Act

Public Law 93-355, July 25, 1974

The Mission

L E G A L S E RV I C E S C O R P O R AT I O N 2 01 1 A N N U A L R E P O R T1

Table of ContentsLSC Across the Country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . gatefold–inside front cover

Letter from the Chairman . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2President’s Message. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32011 by the Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Board of Directors & Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52011 Highlights Photo Gallery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Pro Bono Task Force. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Fiscal Oversight Task Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Disaster Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Message from the Inspector General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

COVER PHOTOS, CLOCKWISE FROM UPPER LEFT: JOHN EIDLEMAN; ERIK UNGER; TOM WOLFF; HILL STREET STUDIOS/GETTY IMAGES

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2 01 1 A N N U A L R E P O R T L E G A L S E RV I C E S C O R P O R AT I O N 2

Board Moves Forward With Task Forces, Outreach

In 2011, facing cuts in funding and ever-increas-

ing demand for civil legal assistance, the Legal

Services Corporation and its grantees redoubled

their efforts to further LSC’s mission to provide

equal access to justice.

Our board of directors launched an impor-

tant new initiative by creating a Pro Bono Task

Force, co-chaired by Martha Minow, dean of

the Harvard Law School and vice chair of the

LSC Board, and Harry J.F. Korrell III, an LSC

board member and partner in the Seattle

office of Davis Wright Tremaine.

The 58-member task force included promi-

nent judges, law firm leaders, law school

deans, legal services lawyers, bar associa-

tion leaders, and pro bono experts.

Divided into five working groups, these

distinguished leaders were tasked with com-

ing up with innovative recommendations to

increase pro bono in a measureable way.

DLA Piper provided professional and

administrative support, and Lisa Dewey, pro

bono partner at DLA Piper, served as a con-

sultant to the task force.

The board also received and adopted the

report from another distinguished task force—

the Special Task Force on Fiscal Oversight.

Formed in 2010 and co-chaired by board

members Robert J. Grey, Jr. and Victor B. Maddox,

the 17-member task force urged a more risk-based,

integrated approach to financial oversight that we

are confident will produce a more effective system

of monitoring the proper use of funding by LSC’s

grantees and a more efficient delivery of legal ser-

vices to clients.

As is its custom, the board held three of its four

quarterly meetings outside Washington D.C.—this

year in Illinois, Virginia and Washington state.

We were privileged to hear from executive

directors and other representatives of LSC-funded

programs in those states and from Arizona,

California, Florida, Georgia, Idaho, Indiana,

Kentucky, Ohio, Oregon, Maine, Maryland,

Missouri, Montana, New York, North Dakota,

South Dakota, Texas, and Wisconsin.

We received fantastic presentations on an

array of topics, including pro bono, technolo-

gy, court helpdesks, law school clinical edu-

cation, and Native American courts. And we

convened other panels on a variety of topics,

including foreclosure, veterans’ rights, domes-

tic violence, and consumer issues.

What we learned is that despite its many

challenges, 2011 was also a year of opportu-

nity and achievement, thanks to the imagina-

tion, energy, and effort of the LSC community.

We were reminded why such commitment is

so important at our Seattle board meeting by

the stirring remarks of Washington State

Supreme Court Chief Justice Barbara Madsen:

“Justice is a paramount duty of govern-

ment. It is the first order of business in our

federal constitution. Ensuring civil equal jus-

tice is a joint federal-state responsibility….

Let us all pledge that we will do all we can

do to protect the promise of our democracy.

That we will work to ensure justice, and

access to justice, for all and that we will work to

ensure that this unique federal-state partnership

for justice endures.”

John G. Levi

Chairman, Board of Directors

Legal Services Corporation

July 26, 2012

Our Board ofDirectors

launched animportant new

initiative by creating a

Pro Bono TaskForce...

Letter from the Chairman

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LSC Meets Demands With Inspiration, Hard Work

I am grateful for the warm reception I received dur-

ing my first year as president of the Legal Services

Corporation. The LSC board, staff, and grantees,

as well as colleagues across the access-to-justice

community, welcomed me with support,

encouragement, and counsel, confirming what

I said when I was appointed to this position—I

have the best job in American law.

The year unfolded as LSC faced the twin

challenges of reduced resources and

increased demand for civil legal services.

Many grantees saw staff reductions, and

some had to close offices. In my visits to legal

aid programs around the country, however, I

saw time and again how, through a remark-

able combination of innovation, hard work,

and self-sacrifice, they are finding new ways

to maximize client service. I met scores of tal-

ented legal aid lawyers whose passion and

commitment to their clients is both palpable

and infectious. They have inspired me and

deepened my own commitment to supporting

them in the work they do.

To leverage the limited resources we have

available, I believe it is essential to improve

collaboration and cooperation among all

those involved in funding, promoting, and

delivering civil legal services. We are working

with other funders of legal services, bar leaders,

pro bono organizations, judges, court administra-

tors, advocacy groups, law schools, and the entire

provider community to increase the efficiency and

effectiveness of service to clients and to avoid

unnecessary duplication.

Our approach to disaster response shows the

benefits of collaboration. Last year had more than

its share of natural disasters, with hurricanes, tor-

nadoes, and floods plaguing large sections of the

country. During 2011, LSC assisted grantees in

more than 28 states with disaster preparation and

response and approved three emergency grants

to help respond to the needs of low-income peo-

ple affected by disasters. We worked with the

American Bar Association, state and local bar

associations, the American Red Cross, the Federal

Emergency Management Agency, and other orga-

nizations to get the most from our efforts.

As budgets tighten, it becomes especially

important to develop new and better ways to

assess and report the benefits and outcomes

of the services that LSC funds. In 2011, using a

planning grant from the Public Welfare

Foundation, we laid the foundation for a data

project designed to improve LSC’s collection

and analysis of case information and to pro-

vide assistance to grantees in managing and

using their own data.

The effective use of technology remains

one of the best ways of getting the most from

what we have, and in 2011 LSC continued its

historical commitment to encouraging inno-

vation in the delivery of legal services.

Through its Technology Initiative Grants (TIG)

program, LSC awarded 37 grants totaling

more than $3.6 million. The TIG grants went

to LSC-funded programs in 25 states for a

variety of projects, including developing

online intake systems; enhancing access to

Web-based resources for Spanish-speaking,

limited English proficient clients; and

expanding StatesideLegal.org, a website that

provides information and resources to veterans

and military families.

It was a challenging year, but one of genuine

accomplishment and new opportunities as well.

We will build on that success as we move for-

ward to expand access to justice and bring the

highest quality possible to the delivery of civil

legal services.

James J. Sandman

President


July 26, 2012

It was a challenging year,

but one of genuine

accomplishmentand new

opportunities as well.

President’s MessageW

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The number of Americans eligible for LSC-funded legal assistance

reached an all-time high: 64.6 million.

LSC’s 135 grantees employed 8,363 full-time staff at

915 offices throughout the United States and its territories.

4,097 were attorneys, 1,447 were paralegals.

32,101 private attorneys accepted pro bono cases

through LSC-funded programs.

Cases closed: 899,817, including 79,578 with the

involvement of pro bono attorneys.

117,595 clients were at least 60 years old.

637,426 were women.

105,090 of the cases involved domestic violence.

Total number of people in all households served: 2,284,162.

2011 by the Numbers


John G. Levi, ChairmanPartner in the Chicago office of SidleyAustin LLP.

Martha Minow, Vice ChairDean of Harvard Law School and theJeremiah Smith Jr. Professor of Law.

Sharon L. BrowneFormer principal attorney in the PacificLegal Foundation’s Individual RightsPractice group and member of theFoundation’s senior management.

Robert J. Grey Jr.Partner in the Richmond and Washingtonoffices of Hunton & Williams LLP.

Charles N.W. Keckler

Harry J.F. Korrell IIIPartner in the Seattle office of DavisWright Tremaine LLP.

Victor B. MaddoxPartner in the Louisville, Ky., firm of FultzMaddox Hovious & Dickens PLC.

Laurie MikvaStaff attorney in the Office of LegalCounsel at the Illinois Department ofEmployment Security.

The Rev. Pius Pietrzyk, O.P.Priest of the Order of Preachers(Dominicans), Province of St. Joseph.

Julie A. ReiskinExecutive director of the Colorado Cross-Disability Coalition.

Gloria Valencia-WeberProfessor at the University of New MexicoSchool of Law.

AuditMaddox, Chair; Korrell; Valencia-WeberDevelopmentLevi, Chair; Minow; Grey; Keckler; Fr. Pius; Herbert S. Garten*; Thomas Smegal*; Frank B. Strickland*FinanceGrey, Chair; Browne; Minow; Fr. Pius; Robert E. Henley Jr.*Governance and Performance ReviewMinow, Chair; Browne; Keckler; ReiskinOperations and RegulationsKeckler, Chair; Grey; Korrell; MikvaPromotion and Provision for the Delivery of Legal ServicesMikva, Chair; Browne; Maddox; Fr. Pius; Reiskin

(*Non-director member)Committees

LSC is headed by an 11-member

Board of Directors appointed by the President

and confirmed by the Senate.

Board of Directors

PHOTOS BY WANA IMAGE


TOP LEFT AND TOP RIGHT: Assistant U.S. Attorney GeneralTony West speaks at LSC’s annual Black History Monthawards luncheon; ABOVE AND RIGHT: Laurence H. Tribe,Senior Counselor for Access to Justice at the U.S.Department of Justice, spoke at LSC in April. From left: LSCBoard members John G. Levi, Gloria Valencia-Weber, RobertJ. Grey Jr., Sharon Browne, Charles N.W. Keckler, Tribe, HarryJ. F. Korrell III, Thomas F. Smegal, Jr. (former board member),Father Pius Pietrzyk, O.P., Julie Reiskin, and LSC PresidentJames J. Sandman.

Access To Justice Address, April

Black History Month Program

2011 Highlights Photo GalleryP

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http://www.lsc.gov/sites/default/files/LSC%202011%20BHM_T%20West%20speech_320x240.mov

http://www.lsc.gov/sites/default/files/Larry%20Tribe%20speech.mp3

7L E G A L S E RV I C E S C O R P O R AT I O N 2 01 1 A N N U A L R E P O R T

TOP LEFT AND TOP RIGHT: Pro Bono Task Force members develop their workplan; Pro Bono Task Force Co-chair Martha Minow speaks to the group at itsfirst meeting. ABOVE LEFT: From left, Michael H. Schill, University of ChicagoLaw School Dean; Hon. Abner J. Mikva; Illinois Attorney General LisaMadigan; LSC Board member Martha Minow; Bruce P. Smith, Dean of theUniversity of Illinois College of Law; LSC Chairman John G. Levi; and LSCPresident James J. Sandman. ABOVE RIGHT: Virginia State Bar PresidentIrving M. Blank (r) and LSC Board member Robert J. Grey Jr. at the Aprilboard meeting in Richmond, Va. LEFT AND ABOVE: LSC Board member HarryKorrell introduces Washington State Chief Justice Barbara Madsen at the Julyboard meeting in Seattle; (l-r) LSC President James J. Sandman, WashingtonState Chief Justice Barbara Madsen and LSC Board Chairman John G. Leviat the July board meeting in Seattle.

Pro Bono Task Force Meeting, Harvard Law School, August

Board of Directors Meeting, Chicago, October

Board of Directors Meeting, Seattle, July

Board of Directors Meeting, Richmond, April

2011 Highlights Photo GalleryP

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LSC’s Board of Directors con-

vened the Pro Bono Task Force

to identify and recommend new

and innovative ways of promot-

ing and enhancing pro bono ini-

tiatives throughout the country.

The 58-member task force

includes leaders from the judi-

ciary, major corporations, pri-

vate practice, law schools, and

the federal government, as well

as the legal aid community. It is

co-chaired by Martha Minow,

dean of the Harvard Law School

and vice-chair of the LSC Board, and Harry J.F.

Korrell III, a partner in the Seattle office of Davis

Wright Tremaine LLP, and an LSC Board member.

The law firm of DLA Piper provides administrative

support, including the involvement of Pro Bono

Partner Elizabeth Dewey.

“Creating change requires leadership,” Minow

said after the group’s first meeting in August. “The

members of this task force are among the most

experienced, capable and thoughtful leaders in

the legal profession.”

The Task Force divided into five working

groups:

• Technology – Co-chaired by David Arroyo and

Kathryn J. Fritz

• Urban – Co-chaired by Douglas Eakeley and

George Hettrick

• Rural – Co-chaired by Judge James D. Moyer

and Deanell Reece Tacha

• Big Ideas – Co-chaired by Sven E. Holmes

and Teresa W. Roseborough

• Obstacles – Co-chaired by Mary K. Ryan and

E. Paige Sensenbrenner

The members of each work-

ing group have researched

best practices and are

developing recommenda-

tions for inclusion in a report

of the full task force, which

will be issued in 2012.

Pro Bono Task Force

Strengthening Partnerships, Identifying Opportunities

ABOVE, LEFT: JudgeJames D. Moyer andEsther LardentABOVE: Harry Korrell

Jonathan LippmanDiane P.WoodJohn T. Broderick Jr.

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“The unmet need in our civil justice system is staggering. Although pro bono involvement

has increased at LSC programs, we must do moreto help ensure access to justice and the orderly

functioning of the civil justice system.”—LSC Board Chairman John G. Levi

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http://www.lsc.gov/sites/default/files/LSC/pdfs/2011--8-01%20Levi%20Welcoming%20Remarks%20Pro%20Bono%20Task%20force%20Aug%201.PDF


Pro Bono Task Force MembersCo-ChairsMartha Minow, Harvard Law School; LSC

Board of DirectorsHarry J.F. Korrell III, Davis Wright Tremaine

LLP; LSC Board of Directors

MembersDavid Arroyo, Scripps Networks InteractiveJohn T. Broderick Jr., University of New

Hampshire School of Law; former Chief Justice, New Hampshire Supreme Court

Christian L. Campbell,YUM! Brands, Inc.Catherine C. Carr, Community Legal

Services of PhiladelphiaMark B. Childress, U.S. Department of

Justice Access to Justice InitiativeDana J. Cornett, Blue Ridge Legal

Services, Inc.Colleen M. Cotter, The Legal Aid Society

of ClevelandCharles Crompton, Latham & Watkins LLPJames E. Doyle, Foley & Lardner LLP;

former Governor of WisconsinDouglas S. Eakeley, Lowenstein Sandler

PC; former LSC Board ChairmanJoAnne A. Epps, Temple University Beasley

School of LawRonald S. Flagg, Sidley Austin LLPKathryn J. Fritz, Fenwick & West LLP L. Joseph Genereux, Dorsey & Whitney LLPTerry M. Hamilton, Lone Star Legal AidNan Heald, Pine Tree Legal AssistanceGeorge H. Hettrick, Hunton & Williams LLPSven E. Holmes, KPMG LLP; former Chief

District Judge, U.S. District Court for the Northern District of Oklahoma

Jeffrey N. Hyman, Apple Inc.Wallace B. Jefferson, Chief Justice,

Supreme Court of TexasRobert Kayihura, Microsoft CorporationDavid A. Kutik, Jones DayEsther F. Lardent, Pro Bono InstituteDeborah Leff, U.S. Department of Justice

Access to Justice InitiativeJonathan Lippman, Chief Judge, State of

New York; Chief Judge, New York Court of Appeals

Patricia A. Madrid, former New Mexico Attorney General

Ginny Martin, New Hampshire Bar Association

Larry S. McDevitt, Chair, American Bar Association Standing Committee on Pro Bono & Public Service

Lee I. Miller, DLA PiperMichael L. Monahan, State Bar of Georgia

Pro Bono Project/Georgia Legal Services Program

James D. Moyer, Judge, U.S. District Court for the Western District of Kentucky

Lynn Overmann, U.S. Department of Justice Access to Justice Initiative

David M. Pantos, Legal Aid of NebraskaLinda K. Rexer, Michigan State Bar

FoundationTeresa W. Roseborough, The Home DepotMary K. Ryan, Nutter McClennen &

Fish LLPGloria Santona, McDonald’s CorporationE. Paige Sensenbrenner, Adams and

Reese LLP

Cliff Sloan, Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates

Thomas F. Smegal Jr., Friends of Legal Services Corporation

Laura Stein, The Clorox CompanyFrank B. Strickland, Strickland Brockington

Lewis LLP; former LSC Board Chair Maureen Thornton Syracuse, District of

Columbia BarDeanell Reece Tacha, Pepperdine

University School of LawDavid S.Tatel, Judge, U.S. Court of

Appeals for the District of Columbia Circuit

Richard L.Thornburgh, former U.S. Attorney General; former Governor of Pennsylvania

Angela C.Vigil, Baker & McKenzieJo-Ann Wallace, National Legal Aid &

Defender AssociationDiana C. White, Legal Assistance

Foundation of Metropolitan ChicagoJohn E. Whitfield, Blue Ridge Legal

Services, Inc.Diane P. Wood, Judge, U.S. Court of

Appeals for the Seventh CircuitLisa C. Wood, Foley Hoag LLP

Ex-officio MembersJohn G. Levi, Chair, LSC Board of Directors;

Sidley Austin LLPSharon L. Browne, LSC Board of DirectorsRobert J. Grey Jr., LSC Board of Directors;

Hunton & Williams LLPJames J. Sandman, President, Legal

Services Corporation

Pro Bono Task Force

Colleen Cotter andJohn Whitfield (4th and5th from left) sharetheir perspectives asdirectors of legal aidprograms. Eight of thetask force membersare on the staffs ofLSC grantees.

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Fiscal Oversight

“We believe that the risk-based,integrated approach to financial

oversight that the Task Force recommends will enable LSC to provide more meaningful and

effective oversight.”—Robert J. Grey, Jr. (left) and Victor B. Maddox,

Fiscal Oversight Task Force Co-Chairs

The LSC board and staff are committed to sound

financial management to ensure the most efficient

and effective delivery of legal services to clients.

As part of that commitment, the LSC board

formed a Special Task Force on Fiscal Oversight

in July, 2010 to review how the corporation per-

forms fiscal oversight of its grantees and to

establish a “gold standard” for conducting this

supervision.

The task force presented its report and recom-

mendations to the board on August 1, 2011. At its

January 2012 quarterly meeting, the board adopted

the recommendations of the task force and directed

management to begin implementation.

The 17 members of the task force included busi-

ness leaders; attorneys; certified public accountants;

grant makers; former inspectors general; and four

LSC board members with expertise in nonprofit

organization, internal controls, and financial oper-

ations. The task force engaged the accounting

and advisory firm of Baker Tilly to assist, review

documentation, and conduct interviews with more

than 25 individuals from LSC management and

staff, the LSC Office of Inspector General (OIG),

and the board.

Among the task force recommendations:

• Strengthen cooperation and information shar-

ing among the board, management and the

Office of Inspector General.

• Consolidate all of LSC’s oversight responsibili-

ties into a single office under the supervision

of a vice president for grants management.

• Conduct a unified, comprehensive LSC risk

assessment process that includes financial

risks and current best practices for address-

ing such risks.

• Improve ways to identify and monitor conflicts

of interest related to staff and grantees.

• Establish training programs for LSC staff,

grantees—including grantee board mem-

bers—and Independent Public Accountants

(IPA).

“We hope that the recommendations in this report

will allow LSC to enhance its processes for

grantee fiscal oversight and to create a more effi-

cient and effective system for evaluating and moni-

toring internal controls related to the proper use of

funding by LSC’s grantees,” wrote co-chairs and

LSC Board members Robert J. Grey, Jr. and Victor

B. Maddox in a letter accompanying the report

In addition to focusing its resources on initia-

tives to improve the corporation’s fiscal oversight

responsibilities, LSC made significant strides in

implementing the recommendation of the

Government Accountability Office (GAO) June

2010 report on LSC’s Grant Awards and Grantee

Program Effectiveness.

Improving Accountability and OversightD

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http://www.lsc.gov/sites/default/files/LSC/pdfs/FiscalOversightTaskForceFINALReport.PDF

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In May, a deadly tornado destroyedthousands of homesin Joplin, Mo.

Beginning with its response to Hurricane Katrina in

2005, LSC has built a national network of experi-

ence and expertise—including both legal services

and other organizations such as the American Red

Cross and the Federal Emergency Management

Agency (FEMA)—to help its grantees better serve

clients when disaster strikes.

LSC-funded programs provide low-income

Americans directly affected by disasters with legal

assistance on matters including temporary hous-

ing, rent gouging, evictions, disaster benefits,

consumer fraud, and family issues such as child-

support payments and custody agreements.

In 2011, LSC assisted grantees in more than 28

states with disaster preparation and response.

After the largest outbreak of tornadoes in U.S. his-

tory ripped through Alabama, Arkansas, Georgia,

Kentucky, Mississippi, North Carolina, and

Tennessee, LSC’s Office of Program Performance

shared information and made connections that

helped programs respond effectively. When back-

to-back hurricanes sparked massive flooding in

Vermont and other eastern seaboard states, LSC

was there with expertise and contacts. After a

deadly tornado devastated Joplin in May, LSC

staff traveled there to provide technical assistance

to Legal Aid of Western Missouri.

“I was very impressed with the cooperation and

coordination among FEMA, the American Red

Cross, legal services programs, and bar associa-

tions,” LSC Senior Program Counsel John Eidleman

said after the visit. “People were working long

hours in service to the Joplin community. It is inspir-

ing to see the legal aid programs and our partners

in disaster relief providing assistance and informa-

tion and ensuring that these disaster survivors have

access to legal services now and in the future.”

In 2011 LSC approved emergency grants to

Legal Services Alabama, Legal Aid of Western

Missouri, and Legal Services Law Line of Vermont

to help meet the additional demand for services

resulting from the disasters. Throughout spring and

summer, LSC staff maintained regular communica-

tion with the American Red Cross and FEMA to

ensure coordination of response in all disaster

zones. LSC also hosted national disaster network-

ing calls, and linked programs responding to disas-

ter for the first time with disaster-experienced legal

aid attorneys willing to share their knowledge.

Disaster Response

Helping Families and Communities Recover

• The largest tornado outbreak in U.S. history hit Alabama hard, causing more than 200 deaths anddestroying more than 6,000 homes. To help provide legal assistance to disaster victims, LSC made anemergency grant of $68,629 to Legal Services Alabama.

• Joplin, Missouri’s deadly tornado killed more than 150 people. It also destroyed a hospital and morethan 8,000 homes, including affordable housing units. To help provide ongoing disaster-specific legalaid, LSC committed $188,333 in emergency funds to Legal Aid of Western Missouri.

• In Vermont, massive flooding caused by Hurricane Irene washed away roads, homes, bridges and thestate's emergency operations center. To provide client services, support for pro bono attorneys andother assistance, LSC made an emergency grant of $65,103 to Legal Services Law Line of Vermont.

Emergency Grants

JOH

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Technology

LSC promotes and supports technological innovation

through its Technology Initiative Grants (TIG) program.

In 2011, LSC awarded grantees in 25 states more than

$3.6 million to support 37 projects. Since its launch in 2000,

TIG has funded 492 projects totaling nearly $40 million.

“LSC seeks to promote innovation in the delivery of legal

services and to serve as many people as possible,” said

President James J. Sandman. “Self-help forms and online

information assist people in navigating the legal system and

enhance access to practical, useful resources.”

Making Information and the CourtsAccessibleIn 2011, TIG funded six projects to

improve intake processes. Land of Lincoln

Legal Assistance Foundation used its

grant to develop a “Statewide Online

Access System” that will serve as a portal

to the Illinois legal services delivery sys-

tem. The project calls for a module to

direct website visitors to the most appropri-

ate resources for their legal problem and a

module to allow potential clients to apply

for legal assistance. The Illinois project

builds upon the work of the Northwest

Justice Project in Washington state, which

developed a pilot system.

Also in 2011, LSC provided TIG funding

to the Legal Aid Society of Northeastern

New York to enhance access to legal aid

resources for Spanish-speaking, limited-

English-proficient clients by developing a

Spanish language portal for a national web-

site, LawHelp.org; by providing a LiveHelp

“chat” connection for Spanish-speaking

users; and by developing 10 national online

guides to help clients understand the courts, civil legal aid

systems, and their language access rights.

In an effort to help people who must navigate courts with-

out a lawyer, LSC awarded Lone Star Legal Aid a TIG grant

to merge Texas Law Help, which provides self-help forms,

and Texas Courts Online, which offers information about the

state court system. The result will be a one-stop, easy-to-

understand information source and includes Spanish and

Vietnamese translations of legal forms.

Serving Veterans More EffectivelyPine Tree Legal Assistance in Maine used a 2010 TIG grant

to launch StatesideLegal.org, a national website serving vet-

erans and their families. In 2011, Pine Tree was awarded a

second TIG grant to expand resources for women veterans

and service members and to expand Web-based collabora-

tions between veterans’ advocates and national experts. In

addition, the TIG funds will be used to strengthen

StatesideLegal’s overall functioning to handle increasing

traffic to the site.

Expanding Pro BonoTIG has, from its start, identified and supported

technologies that can be developed by LSC-fund-

ed programs and replicated by others. One

example is the new TIG project to be led by the

Volunteer Lawyers Project of the Boston Bar

Association, in collaboration with LSC programs,

non-LSC programs, law schools, bar associations,

and the judiciary in Massachusetts. The project

will develop enhancements to the probono.net

template and create a single statewide pro bono

website. This new website will offer the thousands

of pro bono practitioners in Massachusetts a sin-

gle portal where they can find and sign up for pro

bono cases and access training. The resulting

efficiencies should facilitate an increase in pro

bono services to low-income clients. Because of

the shared nature of the probono.net template, the

proposed enhancements will be available at no

cost for replication by 22 other probono.net sites

across the country.

LSC seeks to increase volunteerism for law stu-

dents as well. Idaho Legal Aid Services received

funding to work with Chicago-Kent College of Law

and the Center for Computer-Assisted Legal

Instruction to establish cyber clinics as a permanent part of

U.S. law school education.

2011 TIG ConferenceLSC hosted the 11th Technology Initiative Grants Conference

in January, in Albuquerque, N.M. The conference brought

together technology experts, legal aid lawyers and others to

learn how technology can improve the delivery of legal ser-

vices to low-income Americans.

Promoting Innovation in Legal Services

TIG funding was used todevelop smartphone apps inIllinois

http://tig.lsc.gov/tig-conference-presentations-2011

www.illinoisprobono.org/apps

www.StatesideLegal.org


2011 TIG Grants / Total Funding Awarded = $3,644,146

State Award Amount Project Highlights

Arkansas $43,100 Develop a court channel on the statewide legal aid website to provide comprehensiveinformation about state court system and court proceedings to pro se litigants.

California $354,800 Update the I-CAN! E-file software in English, Spanish and Vietnamese; expand case management system to e-file complex array of domestic violence restraining and protective orders; install desktop video conferencing system.

Colorado $36,293 Implement Web-based screening tool and training modules to assist attorneys and clientswith bankruptcy issues.

Florida $106,125 Provide automated templates to create legal forms on domestic violence, housing andpublic benefits law for use by pro se litigants; improve online intake system.

Georgia $170,735 Develop information access project for a one-stop online portal for document sharing andinformation; improve statewide website.

Idaho $587,075 Upgrade guided interviews for multiple Internet browsers, including mobile devices; create online intake system; establish cyber clinics in law school curricula.

Illinois $127,467 Develop “statewide online access system” on the statewide website to provide triage andintake services.

Iowa $22,269 Upgrade database for pro bono lawyers to enter data securely.

Kentucky $51,600 Use mobile technologies to implement a legal assessment tool for medical-legal partnerships.

Louisiana $51,617 Place touch-screen monitors at local senior centers to provide legal information and self-help materials.

Maine $192,200 Implement video technology to increase access to civil legal information, tools, and assistance for rural clients; expand and improve StatesideLegal.org to include resourcesspecifically for women veterans and service members.

Massachusetts $70,205 Develop a statewide pro bono website.

Michigan $41,600 Expand content on the new statewide website to assist pro se litigants.

Minnesota $177,100 Develop, in partnership with state courts, a user-friendly e-filing system for pro se litigants.

Montana $104,778 Integrate VOIP telephone system and smartphones with case management system.

Nebraska $91,600 Develop a one-stop resource on statewide website, with comprehensive legal informationincluding an online "help chat" feature.

New York $161,975 Create audio/video website content for limited-English-proficient clients, including onlineintake interviews in English and Spanish.

Ohio $532,500 Continued support of national server used by legal services programs to generate automated legal documents and guided interviews for pro se litigants.

Pennsylvania $78,546 Implement online intake system in English and Spanish; upgrade case management system.

Tennessee $83,976 Implement unified communications system, with emphasis on near-paperless offices;develop online intake system.

Texas $72,600 Develop “Texas Court Help” project to help pro se litigants understand and navigate thecourt system.

Utah $42,700 In partnership with the courts, expand the HotDocs library with information and documents for contested family law cases for volunteer attorneys and pro se litigants.

Virginia $91,285 Improve intake system with VOIP telephone system and call center software.

Washington $300,400 Continue funding for the Legal Services National Technology Assistance Project; implement improved information management system.

Wisconsin $51,600 Implement a secure, disaster-ready central repository for all documents and software.

Technology

C


Message From The Inspector General

and on-site quality assurance reviews of selected audit firms’

work. The OIG’s program of audit quality control reviews is

providing broader coverage of the individual audits. It will

ensure that independent public accounting firms performing

grantee audits are following applicable standards and are

subject to review on a four-year cycle, providing strengthened

oversight of the controls over the funds granted by LSC.

The OIG completed more than 31 investigations during fiscal

year 2011, including OIG investigations where: a former office

manager/grants administrator of an LSC grantee and another

employee were indicted for the theft of over $150,000; three for-

mer grantee officials were sentenced to imprisonment for their

roles in major frauds and were ordered to pay full restitution to

the grantees involved; and multiple personnel

actions were taken to remove grantee employees

based on misconduct, the facts of which were

surfaced through OIG investigations.

We continue to place a high priority on pre-

vention and deterrence by employing a variety

of outreach and educational initiatives, such as

conducting regular fraud awareness briefings

and onsite vulnerability assessments for grant

recipients and boards across the country. We

also operate a nationwide hotline for reporting

suspected FWA to further help protect LSC and its grantees.

By continuing to press forward with these and similar activi-

ties, the OIG is helping to identify fraud, waste, and abuse in

LSC programs and operations and to improve the efficiency

and effectiveness of the federally funded legal services pro-

gram. I am gratified at the contributions that we have made

and I am committed to doing all that we can to help improve

and protect LSC’s programs. I am pleased to be able to work

with LSC’s President, Jim Sandman, Board Chairman, John

Levi, and the members of LSC’s Board of Directors, in pursuing

our common commitment to helping LSC achieve its goal of

providing equal access to justice for low-income Americans.

Jeffrey E. Schanz

Inspector General


July 26, 2012

Congress enacted the Inspector General Act to establish

independent offices in most federal agencies, commissions,

and certain federally funded corporations to help oversee tax-

payer funds, to prevent and detect fraud and abuse and to

improve the economy and efficiency of these federally funded

programs. At LSC, these objectives are embraced by the

Office of Inspector General (OIG) and are especially important

as dollars lost to fraud, waste, or abuse (FWA) cost LSC-fund-

ed programs critically needed resources and can deprive

clients of services they need to protect their rights in areas

vital to their personal, legal, and economic security.

At the LSC OIG, we devote much of our oversight work to

conducting professional audits, investigations, and program

analyses. Our work helps improve and protect

LSC’s programs and activities from FWA and

inefficient activities. While maintaining the inde-

pendence of the OIG, our staff works in close

coordination with LSC’s Board of Directors,

LSC’s management, and staff to further the

corporation’s mission of providing equal justice

for all through quality legal representation.

As I enter my fifth year of serving as LSC’s

Inspector General, I am pleased to report that

our office continues to make substantial con-

tributions to improve and protect LSC’s programs by helping

to ensure that limited federal funds are expended for the

laudable purposes granted.

Throughout fiscal year 2011, we focused our audit efforts on

reviewing internal controls at LSC grantees and selected pro-

grams, especially as they related to financial operations. Our

audits identified more than $1.1 million in questioned costs

involving both grantee and LSC headquarters programs. The

reports issued included findings of control weaknesses at one

grantee so significant that they raised questions about both the

reliability and integrity of the entire accounting system; findings

questioning the allocation of certain payments charged to LSC

funds at another grantee; and an array of control deficiencies

in a multi-million dollar LSC technology grant program consti-

tuting a material weakness in the program’s internal control sys-

tem. It is gratifying that in each case prompt steps were taken

by grantees and LSC management to address the problems

and take corrective action.

The OIG is also responsible for overseeing the annual finan-

cial statement audit process for LSC’s grantees. This oversight

was accomplished through desk reviews of all audit reports

Agents of Positive Change


Financial Statements and Independent Auditor’s Report For The Year EndedSeptember 30, 2011Financials


Financial StatementsFinancial Statements and Independent Auditor’s Report For The Year EndedSeptember 30, 2011


Statement of Financial Position September 30, 2011

ASSETS

Current Assets

Cash and cash equivalents $ 80,128,158Accounts receivable, net 16,473Prepaid expenses and deposits 174,875

Total current assets 80,319,506

Property and equipment, net $ 754,240

$ 81,073,746

LIABILITIES and NET ASSETS

Current Liabilities

Grants and contracts payable $ 64,187,855 Accounts payable 968,328 Accrued vacation and other liabilities 1,225,290 Deferred revenue 6,674,663

Total Current Liabilities 73,056,136

NET ASSETS

Unrestricted Undesignated 6,395,222Board designated 855,648Net investment in fixed assets 754,240

Total unrestricted 8,005,110

Temporarily restricted 12,500

Total net assets 8,017,610

$ 81,073,746

The Notes to Financial Statements are an integral part of these statements.

Financial Statements


Financial Statements (cont.)


Statement of Activities and Change in Net Assets Year Ended September 30, 2011

TemporarilySUPPORT and REVENUES Unrestricted Restricted Total

Federal appropriations $ 404,190,000 $ - $ 404,190,000Grant revenue 2,315,360 2,315,360Interest 1,561 1,561Other income 12,019 12,500 24,519Donated Services 67,145 67,145Change in deferred revenue (718,856) ( 718,856)

Total Revenue 405,867,229 12,500 405,879,729

EXPENSES

Program services Grants, contracts and reimbursable expenses 383,027,214 383,027,214Herbert S. Garten Loan Repayment

Assistance Program 1,517,646 1,517,646

Supporting services Management and grants oversight 16,907,199 16,907,199Office of Inspector General 4,038,712 4,038,712

Total expenses 405,490,771 405,490,771

Change in net assets 376,458 12,500 388,958

Net assets, beginning of year 7,628,652 7,628,652

Net assets, end of year $ 8,005,110 $ 12,500 $ 8,017,610


Financial Statements (cont.)

Statement of Cash Flows Year Ended September 30, 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Change in net assets $ 388,958

Adjustments to reconcile change in net assets to net cashand cash equivalents provided by operating activities:

Depreciation and amoritzation 225,917Loss on disposal of assets 268

Changes in assets and liabilities:Accounts receivable 303Prepaid expenses and deposits 205,669Grants and contracts payable (5,243,455)Accounts payable 610,019Accrued vacation and other liabilities 213,641Deferred revenue 718,856

Net cash used by operations (2,879,824)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment (588,429)

Net cash used by investing activities (588,429)

Net decrease in cash and cash equivalents (3,468,253)

CASH AND CASH EQUIVALENTS

Beginning of year 83,596,411

End of year $ 80,128,158

SUPPLEMENTAL INFORMATION

Income taxes paid $ 0

Interest paid $ 0



Notes To Financial Statements September 30, 2011

NOTE 1 ORGANIZATION AND PURPOSE

Legal Services Corporation (“LSC”) is a private non-membership District of Columbia nonprof-it corporation, established by Congress in the Legal Services Corporation Act of 1974, PublicLaw 93-355, and amended in 1977 by Public Law 95-222. The purpose of LSC is to providefinancial support to independent organizations that directly provide legal assistance in non-criminal proceedings or matters to persons financially unable to afford such counsel.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting LSC’s financial statements are prepared on the accrual basis of accounting. Accordingly, rev-enue is recognized when earned, and expenses are recorded when incurred in accordancewith accounting principles generally accepted in the United States of America.

The federal appropriations include amounts received and expended in furtherance of LSC’sobjectives.

Basis of PresentationLSC follows accounting standards established by the Financial Accounting Standards Board(FASB) which is the source of generally accepted accounting principles (GAAP) for not-for-profit entities. The financial statement presentation follows the recommendations of the FASBAccounting Standards Codification (ASC) 958, Not-for-Profit Entities. Under FASB ASC 958,LSC is required to report information regarding its financial position and activities according tothree classes of net assets: unrestricted, temporarily restricted, and permanently restricted.

LSC has recorded transactions in the following net asset categories:

Unrestricted net assets – net assets that are not subject to donor imposed restrictions.

Temporarily restricted net assets – Net assets subject to donor imposed restrictions that will bemet by the passage of time or which will be fulfilled by the actions of LSC.

Cash and Cash EquivalentsLSC’s cash and cash equivalents includes a fund balance with U.S. Treasury of $44,411,646.

Accounts Receivable Accounts receivable are net of an allowance of $1,113,777 at September 30, 2011, deter-mined based on historical experience and an analysis of specific amounts.

Property and Equipment Capital assets are stated at cost and depreciated using the straight-line method over theestimated useful lives of the assets of five to ten years. Depreciation is reported as an unallo-cated expense and is not directly identified with individual functions.

RevenuesFederal appropriations are reported as support and revenue in the period the public lawmakes them available. The appropriation remains available until expended. Unexpendedappropriated funds are shown as deferred revenue and adjustments are made to theaccount Change in Deferred Revenue to recognize the annual adjustment.


NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Grants and Contracts to Recipients Liabilities, expenses and revenues related to grant and contract awards are recognizedwhen the awarding document is fully executed. Grant awards are made to recipients on acalendar year basis from appropriations received by LSC.

Grant RecoveriesGrantees who have not complied with the requirements of the Legal Services CorporationAct of 1974 and implementing regulations may be subject to actions that result in a recoveryof grant funds. Sources of grant refunds may include recoveries of disallowed costs, excessfund balances, unexpended funds on Private Attorney Involvement programs and sanctionsimposed by LSC for failure to comply with other regulatory requirements, as well as othertypes of recoveries. Grant recoveries are reported as a reduction of grant and contractexpenses on the accompanying statement of activities.

Net AssetsNet assets related to federal appropriations have been reported as either designated orundesignated. Designated net assets represent amounts that have been earmarked by theBoard of Directors for continuing programs and administrative activities. Undesignated netassets represent appropriated federal carryover and other operating excess, which are avail-able for future use at the discretion of the Board of Directors. Net assets invested in fixedassets represent investments in property, equipment and computer software, net of accumu-lated depreciation and amortization.

The Board of Directors, through its fund allocation process, has designated $855,648 of thefund balance for continuing programs and administrative activities as of September 30, 2011.Net assets are reported as restricted due to donor stipulations that limit the use of the donat-ed asset.

EstimatesThe preparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect certainreported amounts and disclosures. Accordingly, actual results may differ from those esti-mates.

Income Taxes LSC is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Codeand the applicable income tax regulations of the District of Columbia, except for unrelatedbusiness income. No provision for income taxes was required for the year ended September30, 2011, as LSC had no net unrelated business income.

LSC evaluates its uncertain tax positions using the provisions of FASB ASC 450, Accountingfor Contingencies. Accordingly, a loss contingency is recognized when it is probable that aliability has been incurred as of the date of the financial statements and the amount of theloss can be reasonably estimated. The amount recognized is subject to estimates and man-agement judgment with respect to the likely outcome of each uncertain tax position. Theamount that is ultimately sustained for an individual uncertain tax position or for all uncertaintax positions in the aggregate could differ from the amount recognized. There were no liabili-ties for uncertain tax positions as of September 30, 2011. There was also no tax-related tointerest and penalties reported in the financial statements.

Notes To Financial Statements (cont.) September 30, 2011



NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

LSC’s Forms 990, Return of Organization Exempt from Income Tax, for the years endingSeptember 30, 2008, 2009 and 2010 are subject to examination by the IRS, generally for 3years after they were filed.

Concentration of RevenueLSC receives substantially all of its revenue from direct federal government appropriations.

NOTE 3 CONCENTRATION OF CREDIT RISK – DEPOSITS

At September 30, 2011, LSC funds are in non-interest bearing accounts. LSC’s cashaccounts are subject to Federal Deposit Insurance Corporation (FDIC) limits. Non-interestingbearing accounts are fully insured by the FDIC through December 31, 2012.

NOTE 4 EQUIPMENT

Property and equipment consists of the following at September 30, 2011:

Beginning EndingBalance Additions Disposals Balance

Furniture and equipment $ 1,939,453 $ 423,506 $ (53,008) $ 2,309,951Software 406,050 60,973 - 467,022Leasehold improvements 351,698 103,949 - 455,647

Subtotal 2,697,201 588,428 (53,008) 3,232,620Less: Accumulated depreciation

/amoritization (2,305,205) (255,917) 52,741 (2,478,380)

Capital assets (net) $ 391,996 $ 362,511 $ (267) $ 754,240

Depreciation/amortization expense for the year ended September 30, 2011 is $225,917.

NOTE 5 GRANT REVENUE

LSC was awarded a grant from the U.S. Court of Veterans Appeals for the purpose of furnish-ing legal assistance to veterans. Grant revenues for the year ended September 30, 2011, total$2,315,360.


NOTE 6 GRANTS AND CONTRACTS EXPENSE

Grants and contracts expense for the year ended September 30, 2011 consists of the following:

2011Basic Field Programs $ 377,892,573U.S. Court of Veterans Appeals 2,311,575Grant From Other Funds 111,409Technology Initiatives 2,903,326Grant Recoveries (191,669)

Total $ 383,027,214

NOTE 7 MANAGEMENT AND GRANTS OVERSIGHT

Management and grants oversight expenses for the year ended September 30, 2011 wereas follows:

2011Compensation and benefits $ 12,157,984Temporary employee pay 507,879Consulting 618,469Travel and transportation 800,518Communications 106,815Occupancy cost 1,730,590Printing and reproduction 62,706Other operating expenses 696,319Capital expenditures 515,182

Total 17,196,462

Depreciation & Amoritization 225,917Loss on disposal of assets 268Less: capitalized assets (515,448)

$ 16,907,199




NOTE 8 OFFICE OF INSPECTOR GENERAL

LSC’s Office of Inspector General expenses for the year ended September 30, 2011 were asfollows:

2011Compensation and benefits $ 3,579,686Temporary employee pay 8,408Consulting 167,188Travel and transportation 199,678Communications 17,331Occupancy cost 1,482Printing and reproduction 8,271Other operating expenses 56,668Capital expenditures 73,246

Total 4,111,958

Less: capitalized assets (73,246)

$ 4,038,712

NOTE 9 RETIREMENT PLANS

Pursuant to the Legal Services Corporation Act, all officers and employees hired beforeOctober 1, 1988, are participants in the Civil Service Retirement System (“CSRS”), althoughthey are neither officers nor employees of the federal government. The CSRS plan is adminis-tered by the United States Office of Personnel Management (“OPM”). LSC makes contribu-tions at rates applicable to agencies of the federal government. The contributions do notequal the full service cost of the pension expense, which is the actuarial present value ofbenefits attributed to services rendered by covered employees during the accounting period.The measurement of service cost requires the use of actuarial cost methods to determine thepercentage of the employees’ basic compensation sufficient to fund their projected pensionbenefit. These percentages (cost factors) are provided by OPM.

The excess of total pension expense over the amount contributed by LSC and by LSCemployees represents the amount which must be financed directly by OPM. Several employ-ees participate in the federal Employees Health Benefits plan (“FEHB”), also administered bythe OPM. LSC pays the cost of current employees.

Post-retirement benefits are paid for by the OPM. No amounts have been recognized in thefinancial statements for these imputed costs as they are not deemed material. LSC does notreport in its financial statements CSRS or FEHB assets, accumulated plan benefits or unfund-ed liabilities, if any, applicable to its employees.

Eligible employees may contribute up to 5% of their pretax earnings to the federal ThriftSavings Plan. Also, all officers and employees hired after September 30, 1988 are ineligiblefor the Civil Service Retirement System, but are eligible to participate in LSC’s pension andthrift plan, which is a tax deferred annuity plan subject to Section 403(b) of the Internal


NOTE 9 RETIREMENT PLANS (Continued)

Revenue Code. Individuals can make contributions up to the maximum permitted by law.LSC matches the first 2.51% contributed by the employee. In addition, LSC contributes 6%of each eligible employee’s salary regardless of their participation to the maximum permittedunder federal income tax rules.

LSC’s contributions to these plans for the year ended September 30, 2011 were $994,311.The amounts are included in compensation and benefits for management and administrationexpenses. LSC also offers a tax deferred annuity savings plan for eligible employees. Nocontributions are made to this plan by LSC.

NOTE 10 OPERATING LEASE

On June 1, 2003, LSC commenced an operating lease agreement for office space whichprovides for a non-escalating annual base rent for a 10-year term. LSC has no obligation topay a portion of building operating expenses. LSC has the right to terminate the lease by giv-ing no less than 120-day prior written notice in the event that LSC does not receive an appro-priation from Congress for administrative costs sufficient to cover LSC and its rentalobligations for any period during the term of the lease. Future minimum lease paymentsrequired under this lease as of September 30, 2011 are as follows:

Fiscal Year Amount

2012 1,710,0002013 1,140,000

$ 2,850,000

Rental expense for the year ended September 30, 2011 is $1,710,000.

NOTE 11 CONTINGENCIES

Grants and Contracts LSC receives its funding from appropriations by Congress and grants from the U.S. Court ofVeterans Appeals and, accordingly, may be subject to federal audits. In addition, LSC pro-vides significant funding to numerous independent organizations, which are subject to theirown independent audits and audits by LSC. LSC’s management does not expect any signifi-cant adjustments as a result of federal audits, should they occur, or from the audits of thegrantees’ independent auditors.

LSC receives substantially all of its revenue from direct federal government appropriations.Should there be a significant reduction in this revenue, LSC’s programs and activities couldwell be negatively affected.

ClaimsLSC is defending what started as two separate cases but have been consolidated into onecase involving challenges to LSC regulations. Plaintiffs are seeking injunctive relief but nomonetary damages, except for attorneys’ fees but LSC’s legal fees in these cases werebeing paid by its insurance carriers. Insurance is no longer available to cover legal fees in




NOTE 11 CONTINGENCIES (Continued)

this consolidated matter and must be paid directly by LSC out of normal operating funds,without reimbursement by insurance carriers. However, the matter has been dormant since2009 and no renewed activity is anticipated. No funds have been recorded in the financialstatements for any contingent liability associated with future legal fees.

In August of 2011, a civil lawsuit, Wojdak v LSC, U.S. Department of Labor, U.S. Departmentof the Treasury, was filed against LSC but never served. Although the lawsuit names LSC asa co-defendant, no specific claims were made against LSC. No funds have been recorded inthe financial statements for any contingent liability associated with this matter.

Since June of 2011, several employees of LSC have filed wage discrimination complaintswith the Equal Employment Opportunity Commission (EEOC). As they were only recentlyfiled, all but one remain pending before the EEOC. Outside counsel for the Corporation hasassessed the pending claims and advised that none is meritorious. Given that, in the opinionof counsel, none of these matters poses a reasonable possibility of an unfavorable outcome,no funds have been recorded in the financial statements for any contingent liability associat-ed with these matters.

Reclassification of employees from exempt to non-exemptNo one made a claim against LSC alleging misclassification or failure to pay overtime, butLSC reclassified certain individuals from exempt to nonexempt and retroactively paid wagesfor hours worked in excess of 37.5 hours per week. Sufficient funds were available to makethese payments without affecting current operations. Total amount paid during year endedSeptember 30, 2011 is $9,448 and the amount due at September 30, 2011 is $25,782.

Collection MattersIn 2010, upon concluding that an LSC grantee had misused LSC funds and committed otherfinancial irregularities, LSC disallowed approximately $716,261 of the grantee’s costs. Onappeal, LSC agreed to reduce that amount to $467,619. In 2011, the grantee was completelydefunded. The Corporation is now exploring its options on how to recover the previously dis-allowed amount of $467,619. No amounts have been recorded.

NOTE 12 LOAN REPAYMENT ASSISTANCE PROGRAM

Through the Herbert S. Garten Loan Repayment Assistance Program (LRAP), established in2005 and funded by Congressional appropriations, LSC makes a limited number of forgiv-able loans to attorneys employed by its grantee programs to help repay law school debt.Each participant receives up to $5,600 per year for three years – for a maximum of $16,800 ifthey remain eligible and funding remains available.

Participants must commit to remain with the LSC-funded legal services program for threeyears. As long as the participant remains in good standing, the loans are forgiven.Participants that do not successfully complete employment within the loan terms must repaythe loans. No provision has been made in the accompanying financial statements to reflectany interest on the loans as management has deemed these amounts to be immaterial.

Accounts receivable are stated at the amount management expects to collect from refundedloans. Management provides for probable forgiven amounts through an adjustment to a valu-ation allowance based on its assessment of the current status of individual accounts.Accounts receivable balances are written-off through a charge to the valuation allowance


NOTE 12 LOAN REPAYMENT ASSISTANCE PROGRAM (Continued)

in the year the loans are forgiven. Deferred revenue is comprised of funding available forfuture loans and loan amounts outstanding.

LRAP balances at September 30, 2011 are as follows:

Cash $ 1,176,638Accounts receivable, net 7,535Deferred revenue 1,184,223

LRAP activity for the year ended September 30, 2011 is as follows:

Loans made $ 1,518,607Loans forgiven 866,953Net change in allowance for loan forgiveness 650,693

NOTE 13 TEMPORARILY RESTRICTED NET ASSET

LSC received donations totaling $12,500 which are restricted for the American BarFoundation Access Across America research project.

NOTE 14 PRIOR PERIOD ADJUSTMENT

During the FY 2011 audit, the decision was made to set up an allowance for the Herbert S.Garten Loan Repayment Assistance Program to properly report the Loan RepaymentAssistance Program Receivable at its net realizable value in accordance with generallyaccepted accounting principles. The total amount of the adjustment related to FY2010 was$463,084 causing the accounts receivable to be adjusted from $479,860 to $16,776 on thestatement of financial position and the Herbert S. Garten Loan Repayment AssistanceProgram expense to be adjusted from $572,162 to $990,246 on the statement of changes innet assets. In addition, the adjustment caused the deferred revenue to be adjusted from$6,418,891 to $5,955,807 on the statement of financial position and the change in deferredrevenue to be adjusted from $3,619,052 to $3,155,968 on the statement of activities. Thesechanges had no effect on the net assets of LSC at September 30, 2010.

NOTE 15 SUBSEQUENT EVENTS

Legal Services Corporation has evaluated subsequent events occurring after the statementsof financial position date through the date of January 9, 2012 the date the financial state-ments were available for release.

Fiscal Year 2012 Funding

On November 17, 2011, the House and Senate passed the Conference Report (HouseReport 112-284) to accompany H.R. 2122, an appropriations bill for Fiscal Year 2012 thatincluded $348 million for the Legal Services Corporation. President Obama signed the billinto law (Public Law 112-55) on November 18.




NOTE 15 SUBSEQUENT EVENTS (Continued)

The appropriations bill, popularly known as the “minibus,” combined the Agriculture,Commerce-Justice-Science and Transportation-HUD spending bills. LSC is funded throughthe Commerce, Justice, Science and Related Agencies Appropriations Subcommittee.

The Fiscal Year 2012 appropriation will provide $322.4 million for basic field grants, $3.4 mil-lion for the Technology Initiative Grants program, $1 million for the student loan repaymentassistance program, $17 million for management and grants oversight, and $4.2 million forthe LSC Office of Inspector General. Prior to enactment, LSC operated on funds provided bya Continuing Resolution (Public Law 112-36) that cut all accounts by 1.5 percent and expiredon November 18, 2011. LSC was funded at $398 million under the interim bill.

Previous auditors’ reports are available in LSC’s annual reports:

www.LSC.gov/about/annual-report

For further information, contact:Office of Government Relations and Public Affairs


3333 K Street, NW

Washington, DC 20007

202.295.1617

www.lsc.gov

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2011 Annual Report

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